Ask a program manager for the estimate at completion and you will usually get the budget. Not because they are hiding anything — because the EAC was set at award, nothing has forced a revision, and the budget is the number everyone remembers.
An EAC that equals the budget is not an estimate. It is a hope with a line item.
The most common failure is not staleness, it is direction. Someone takes the budget, subtracts costs to date, and calls the remainder the estimate to complete. That calculation cannot produce an overrun. It is arithmetic that guarantees the answer, and it is the reason overruns surface in the last quarter of a contract rather than the second.
A real EAC is built the other way: what has been spent, plus what the remaining work will cost, estimated from the remaining work itself.
Take a contract with a four million dollar budget. Two point four million spent. The work completed is worth two million of budgeted value.
| Amount | |
|---|---|
| Budget at completion | 4,000,000 |
| Actual cost to date | 2,400,000 |
| Value of work performed | 2,000,000 |
| Cost performance index | 0.83 |
| EAC if remaining work goes to plan | 4,400,000 |
| EAC if performance continues | 4,800,000 |
You have spent 2.4 million to produce 2 million of value. Every dollar of budget is costing you about a dollar twenty. If the rest of the work goes exactly to plan you finish four hundred thousand over. If it performs like the work you have already done, you finish eight hundred thousand over.
Neither number is the answer. They are the range, and the honest EAC is a judgment about where inside it you land — supported by a reason. If you are claiming the optimistic end, something specific has to have changed: a subcontractor replaced, a design settled, a learning curve genuinely behind you. "The team will pick it up" is not a reason.
Not laziness. The EAC lives in a spreadsheet nobody owns, updating it requires cost data that arrives two weeks after close, and by then the program manager is running the program. Then there is the reporting problem: revising an EAC upward is a bad conversation, and nothing about the process forces you to have it. Silence is always the easier option when the update is discretionary.
Make it a standing step in the close, not a quarterly exercise. Four questions per contract:
That last question is the one that matters. A number with no narrative is not reviewable, and an EAC that moves three hundred thousand dollars with no explanation attached will be challenged — correctly.
The deeper issue is usually not the EAC itself. It is that the program manager and the accounting system are keeping separate books, and the EAC is where the gap becomes visible. If the PM's spend does not tie to the ledger, no estimate built on it will hold. Fixing the EAC process without fixing the reconciliation underneath it produces a more current wrong number.
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A useful EAC process is part of a larger operating forecast that connects contracts, staffing, funding and the general ledger.
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